Aker Solutions ASA
OSE:AKSO

Watchlist Manager
Aker Solutions ASA Logo
Aker Solutions ASA
OSE:AKSO
Watchlist
Price: 31 NOK 1.04%
Market Cap: 15.3B NOK
Have any thoughts about
Aker Solutions ASA?
Write Note

Earnings Call Transcript

Earnings Call Transcript
2020-Q1

from 0
T
Tove Røskaft
Head of Communications & Investor Relations

Good morning and welcome to Aker Solutions' Presentation of First Quarter Results for 2020. My name is Tove Røskaft, and I'm Head of Communications at Aker Solutions. With me here today is our Chief Executive Officer, Luis Araujo; and our Chief Financial Officer, Ole Martin Grimsrud. They will go through the main developments of the quarter and give you some insight to the current situation. We will also have time for some live questions after their presentations. Luis, I will now hand it over to you.

L
Luis Antonio Gomes Araujo
Chief Executive Officer

Thank you, Tove. Good morning, and thank you for joining us on this call today. I hope you are healthy and safe wherever you are. The first quarter of 2020 was unlike anything we had previously experienced in the industry. The COVID-19 pandemic, together with a sharp drop in oil prices, caused significant disruption to the global economy. The global energy sector was hit particularly hard. In the first phase, the pandemic led countries around the world to introduce travel bans and close down societies, which impacted our supply chain and our project execution. Some offshore work was suspended, and operators -- as operators reduced mining to a bare minimum to protect their people and facilities. Then as the oil price collapsed, our customers responded announcing CapEx reductions by around 20% to 30% for 2020 and beyond.Under these extreme circumstances, after protecting the health and safety of our people, our main priority is to safeguard the financial strength of our company. At Aker Solutions, we immediately implemented actions to address both these issues. We are doing our utmost to mitigate the effects for our employees, customers, shareholders and other stakeholders around the world. At the same time, I'm very proud that we have managed to maintain productivity and complete key deliveries to our clients during very difficult times. The measures that were implemented around the world to stop the spread of the virus caused challenges for both Aker Solutions and our customers' operations. They affected the entire value chain and led to lower activity levels than planned. In Norway, we experienced a decline in brownfield work towards the end of the quarter as operators postponed jobs and demobilized personnel to reduce the risk of spreading the virus. Aker Solutions has been following national health authority guidelines and requirements for office and all office locations. We also closed down some manufacturing locations temporarily. These have today reopened under certain health controls. Most of our office-based employees are still working from home. I'm pleased to see that we have managed to maintain high levels of productivity. We demobilized about 3,300 contractors including 700 non-Nordic contractors in Norway to comply with new national and customer restrictions. We have temporarily laid off more than 850 employees in Norway, the U.K. and the U.S., benefiting from local government schemes to support the industry during the current turmoil. This helps mitigate the negative impact of postponed work. Despite these difficult conditions, we have managed to keep productivity levels high in many locations and key projects, and we continue delivering to our clients around the globe. The picture you see in the bottom right of the slide was taken in Egersund last week. We completed deliveries of 11 manifolds, 4 templates and 2 satellites to Equinor, Askeladd, Troll and Johan Castberg projects according to the agreed schedule. During the quarter, we achieved some important milestone for CNOOC. The first 2 subsidiaries and tools were delivered for the Lingshui project, which is the first deepwater subsea project. We also performed the first phase of umbilical load-outs in Norway and the U.S. for the Lingshui and Liuhua subsea developments in the South China sea. The second phase for the same projects were completed after the end of the quarter. All load-outs were completed ahead of schedule. These are just a few examples of how we managed to move quickly and adapt in order to deliver critical equipment and service to our clients. They demonstrate the resilience of our people, and we are thankful for their commitment. Now let's go to the key numbers for the quarter. Overall, operating revenue for the first quarter was NOK 6.5 billion, down 10% from the same period last year. Our first quarter EBITDA was NOK 149 million. Excluding special items, EBITDA was NOK 340 million, down from NOK 636 million a year earlier. This was equal to an underlying margin of 4.8%. Order intake was NOK 6.6 billion in the quarter. As shown in the graph, our order intake rose for the third quarter in a row. The order backlog increased slightly to NOK 26.4 billion at the end of the first quarter. We ended the quarter with a liquidity buffer of NOK 5.8 billion. Afterwards, Ole Martin will take you through the numbers in more details. Now to the orders. We secured 2 strategically important contracts during the first quarter. Last month, we signed a 5-year agreement to provide offshore maintenance and modification services to Brunei Shell Petroleum. This is a renewal of the work we have done in Brunei over the last several years. The scope of work covers maintenance and upgrades to maintain production levels for more than 200 offshore assets. In March, we signed a 20-year exclusive agreement to provide umbilicals for Chevron-operated oil and gas fields in the Gulf of Mexico. We also created the first work order. We received a first order under this new agreement to provide 24 kilometers of umbilicals for Chevron anchor project. Other wins during the quarter included the FEED for the electrification of the Troll B and C platforms, which I briefly mentioned in February. This is an important contract that confirms our strategic ambition towards the energy transition and reducing CO2 emissions. Our global front-end team secured another 42 new studies and projects in the quarter. This is up from 31 last year. We also saw 7 studies become FEEDs, which usually indicates more work coming our way. However, under the current market conditions, we would expect the number of studies to remain robust with more uncertainty around the timing of conversions. But like in previous downturns, I believe our strong position front-end will be a key differentiator in our relationships with key clients. We use our deep knowledge of the key individual projects we work on to prioritize and allocate our resources on the right projects. In March, oil prices dropped from above $50 to less than $30 and continued to fall recently. Oil companies responded by cutting their CapEx plans for 2020 by between 20% and 30%. U.S. shale is probably hit the hardest. But investments in offshore projects where Aker Solutions is focused seem to be more resilient. However, our clients are still prioritizing and reviewing their CapEx plans. We expect several shore greenfield projects to be delayed. We believe there will be some exceptions when decisions are motivated by very low breakeven cost or national interests. As I mentioned earlier, our main financial priority is to protect our balance sheet and financial performance. At the same time, we restructured the company to meet future demand in terms of capacity and competence. We have cut our CapEx investment level in 2020 to about NOK 500 million, down 40% from the 2019 level. We will focus future investments on supporting our 20/25/30 strategy. So renewable energy and low-carbon solutions will have priority. At the start of April, we share plans to reduce our fixed cost level by at least NOK 750 million on an annualized basis. This target has now been raised to about NOK 1 billion. In addition to removing our flexible capacity of contractors, the cost reduction measures and actions include consolidating subsidiary production to Brazil and Malaysia. This means that our site in Norway will no longer produce subsidiaries after 2020. This is effectively removing market capacity of about 60 subsidiaries per year. We will also reduce mining at our plants in Malaysia and Brazil to strengthen the plant's competitive position and adapt to forecasted market demand. We will also close our yard in Sandnessjøen after we have delivered the ongoing projects to Aker BP and Equinor this summer. With the expected volume of projects we see coming, we can no longer justify keeping the yard open. And we already decided to freeze salaries and cancel all variable pay schemes for 2020. Finally, we have started a process to reduce overhead personnel and cost across all regions. This includes reviewing our global footprint and adjusting for the expected capacity. It is too early to give a final number of people who will be affected by this process. But it's important to highlight that to date, we have reduced our headcount by about 5,000 people in total compared to the end of 2019. All in all, we have been taking swift and decisive action to reduce costs and adapt to the new market conditions. Given the significant market volatility, the outlook is difficult to predict. Short term, it is clear that the second quarter is likely to be uncertain and disruptive to our industry. Our main focus is to continue the duty care of protecting the health and safety of our people and securing business continuity. We will continue to deliver on our NOK 1 billion cost reduction program, as detailed on previous slides. When we look at the medium to long term, we see 2020 revenue down about 30% from 2019 levels. This is due to low activity in brownfield and delayed sanctioning of greenfield projects, while we expect subsea service to remain more resilient. At the same time, we will optimize our footprint, the structure and capacity to position Aker Solutions to meet future market demand. Long term, our 20/25/30 strategy remains firm. We will continue to support the energy transition and use our capabilities and leading position in segments such as offshore electrification, subsea gas compression, carbon capture, and offshore floating wind. In this environment, our front expertise will be a key differentiator as it strengthens our key client partnerships. To sum up, we expect near-term conditions to remain volatile and the full year to be challenging. But I believe that Aker Solutions has taken the right actions to manage current market conditions and also position our company to come through this downturn as a strong and competitive player. Thank you for listening. And now Ole Martin will take you through the numbers in more details.

O
Ole Martin Grimsrud
Chief Financial Officer

Thank you, Luis, and good morning. I will now take you through the key financial highlights of the first quarter, our segment performance and run through our financial guidance before moving to Q&A. As always, all numbers mentioned are in Norwegian kroner, and let's start with the income statement. Overall operating revenue for the first quarter was NOK 6.5 billion, down 10% year-on-year. The revenue decline was driven by the field design segment following the record activity level last year. Revenue in the Subsea segment and in Services remained more stable year-on-year. Our reported first quarter EBITDA was NOK 149 million. Excluding special items, EBITDA was NOK 314 million, down from NOK 636 million a year earlier. This was equal to an underlying margin of 4.8% compared to 8.8% in the same period last year, reflecting the lower activity level and a subsea backlog won in a very competitive market. In addition, we started to experience slowdown in brownfield activities towards the end of the quarter driven by the coronavirus and the lower oil price. As guided, we have included restructuring cost of NOK 155 million in the quarter. This is related to our improvement efforts to optimize our footprint and organization to match activity where necessary, including lowering headcount and closing certain facilities, as mentioned by Luis. Further restructuring costs may occur in later quarters. First quarter depreciation included impairments of NOK 548 million, as previously guided, mainly related to noncash impairments of intangible assets, goodwill and other long-lived assets. This charge was driven by the significant decline in market valuations during the quarter driven by the coronavirus and the lower oil price. Excluding the effects of impairments, the depreciation was NOK 302 million, in line with our previous guidance. We continue to expect underlying depreciation, including the effects of IFRS 16, to be around NOK 1.2 billion per year. Our reported first quarter EBIT or operating profit decreased year-on-year to minus NOK 701 million from NOK 325 million last year. Excluding special items and impairments, EBIT was NOK 12 million, and the margin was 0.2% versus 4.5% in the previous year. Net financial items were negative NOK 141 million in the quarter, excluding a minor unrealized hedging gain of NOK 13 million. And we continue to see our net financial items around NOK 100 million per quarter going forward. Our P&L tax charge was equal to a rate of 12% in the quarter related to the negative income before tax. We continue to expect average P&L tax rates to be in the low- to mid-30% range over time. We ended the quarter with a net income of negative NOK 730 million. And excluding special items, the net income was negative NOK 162 million, and earnings per share, minus NOK 0.64, down from NOK 0.58 last year. Now moving to our balance sheet and cash flow performance. Our working capital or net current operating assets ended the first quarter at NOK 1.1 billion. In the current market environment, we have a strong focus on cash collection in addition to other measures to improve working capital performance. It is challenging to provide guidance in this environment. But following the normalization of our working capital during last year, it is expected that working capital will continue to trend around NOK 1 billion to NOK 1.3 billion going forward. Our cash flow from operations in the first quarter was minus NOK 299 million, reflecting the working capital outflow. Our investing cash flows totaled a net negative NOK 261 million. This was related to the finalization of project-related investments, such as tooling for the Mero projects and a few other already committed investments. And as communicated, CapEx and R&D will be significantly reduced to about NOK 500 million for this year, which is about 40% lower than last year. Excluding IFRS 16, we had a net interest-bearing debt of NOK 2.1 billion at the end of the first quarter, up from NOK 1.6 billion at the end of fourth quarter. Our net interest-bearing debt to EBITDA ended at 1.4x. And as a reminder, the leverage covenants on both bonds and the revolving credit facility are at 3.5x pre-IFRS 16. As a precautionary measure related to the coronavirus and the low oil price, we drew an additional NOK 1.4 billion on our revolving credit facility during the first quarter. And our total liquidity buffer at the end of the quarter was at NOK 5.8 billion, including the revolving credit facility. In the current environment, our main financial priority is cash flow performance and protecting the company's balance sheet. Now on to Projects, where first quarter revenue was down 14% year-on-year mainly driven by the field design subsegment following the record activity within brownfield projects last year. This resulted in an underlying Projects EBITDA of NOK 305 million, with a margin of 6% for the quarter, down from 8% last year. EBIT excluding special items was NOK 101 million with a margin of 2%, down from 4.7% last year. The margins in the first quarter reflect the lower activity level and the subsea backlog won in a very competitive market. First quarter order intake in Projects was NOK 2.7 billion with a book-to-bill at 0.5x. Now some further details for Subsea and field design within the Projects reporting segment. Revenue from subsea projects remained stable from the same period last year and sequentially driven by continued progress on ongoing projects. Revenue from field design projects decreased 21% year-on-year and 18% sequentially, a normalization we guided for at Q4, following the record activity last year driven by brownfield modification and hookup projects in the North Sea. First quarter order intake in Projects overall was NOK 2.7 billion, with NOK 1.4 billion in subsea and NOK 1.3 billion in field design. The backlog in Projects ended the quarter at NOK 14.2 billion. In Services, activity increased year-on-year in the Subsea Lifecycle Services subsegment, while the production asset services subsegment experienced some adverse impacts of the coronavirus and the low oil price in the last month of the quarter. We are now experiencing that customers are postponing some of their planned spending within production asset services, particularly in Brazil and in the North Sea. And this will impact activity level in this subsegment over the next quarters. Underlying EBITDA in Services was NOK 78 million with a margin of 6%, down from 14% in the same quarter last year. This was driven by the lower activity level within production asset services, in particular, in Brazil and the North Sea, and one-off adjustments of about NOK 60 million related to the coronavirus and some contract-related adjustments in Brazil not included in the special items. This resulted in an EBIT of NOK 50 million with a margin of 1% versus 9% a year ago. First quarter order intake in Services was strong at NOK 4 billion, with a book-to-bill of 2.8x. And as a reminder, in addition, part of the Services order intake is short cycled or book and turn in nature. The backlog in Services ended the quarter at NOK 12 billion. Now over to the order intake and backlog performance for the group overall. We had a good order intake in the first quarter of NOK 6.6 billion, equal to a book-to-bill of 1x. Our backlog increased to NOK 26.4 billion. And the backlog for execution during the rest of 2020 is now at NOK 11.4 billion. Due to the significant impacts of the coronavirus and the steep decline in oil prices, the expectation is that the order intake in our industry and for Aker Solutions will be limited during the second quarter. The duration of the crisis remain uncertain. But as the situation might stabilize more over the summer, we see the possibility for an improved order intake during the second half of the year. We are currently tendering for Projects and Services with a total value of around NOK 45 billion. Very few of the main prospects have been outright canceled, but rather pushed out in time. And we have not experienced any backlog cancellations as of now. Finally, over to our guidance. Overall, revenues have grown 30% over the 2 last years. As guided previously, we expect revenues now for 2020 to decline by around 30% versus last year driven by the coronavirus and the low oil price as well as the normalization of the record-high activity level within Field Design. Secured 2020 revenues in the backlog at the moment is about 80% to 90%, excluding the book-and-turn revenue in Services. The activity level in Q2 will be significantly impacted for our industry. Customers are cutting planned spending and sanctioning of new projects. We experienced already in March lower activity within brownfield maintenance services in Brazil and the North Sea. And this will impact activity level more severe over the next quarters. Given the significant market uncertainty, it is challenging to provide an EBITDA margin guidance at this stage. But as mentioned by Luis, we have initiated and implemented decisive, short-term and long-term cost-reduction measures. However, it is too early to say if these will fully mitigate the impacts of the coronavirus and the low oil price in 2020. Our main focus in this environment is strict cost and capital discipline, including substantial cost reductions, reductions in capital expenditures and strong working capital performance in order to protect the balance sheet of Aker Solutions. We have cut our expectations for CapEx by 40% from last year and have started to execute on a restructuring plan where the target is increased from NOK 750 million to around NOK 1 billion in annualized fixed cost savings across the organization. We target this to be achieved during the second half of the year. These cost savings include reduction in our headcount, manufacturing footprint and overhead cost. The cost-out initiatives respond to near-term activity declines as well as anticipated longer-term structural changes for our industry. And with that, I would like to thank you for listening. That was the end of our presentation, and we will now open for Q&A.

T
Tove Røskaft
Head of Communications & Investor Relations

Moderator, we are now ready for some Q&A. Each questioner can ask a question with a follow-up question. It will be good if you state your name and the company you represent before your question.

Operator

[Operator Instructions] We will now take our first question from Amy Wong from UBS.

A
Amy Wong

A couple of questions. Amy Wong from UBS. A couple of questions from me. So the first one is just to pick up on some of your closing comments you had there about reviewing the industry for structural changes, and you've taken some impairments as well. So could you talk about how you see your end markets structurally changing as a result of COVID or any other circumstances? That's my first question. And my second question is just then on your Services margin, which seems to have -- your volumes are very, very good this quarter, but the margin was very, very low. So can you just talk about the dynamics there of what drove those, please?

L
Luis Antonio Gomes Araujo
Chief Executive Officer

Thank you, Amy. First question, structural changes, I mean, I think it's absolutely normal to consider that such a shock ever seen in the market recently with COVID-19 and the sharp drop in oil price. Excess supply and so forth that we see right now, of course, I don't think the industry will be the same after we are done, that we've completed, and things are returning to some sort of normality. So I would expect, of course, to have -- to see less players on both ends, on the customer side as well as the supplier side. And again, in terms of capacity, I would expect to see far less capacity in the industry going forward with -- if you don't take care of that, it might be a concern when things go back to production. From our end, we know that also by dialogue with our clients, and we have spoken to all of them, personally spoke with -- last week with all our clients at senior level, and they know how important we are for them, especially considering that we have delivered recently. So we do believe -- they do believe we have to be around to serve them when they need us again. Of course, right now, it's tough to sanction any greenfield projects, but there are a lot of facilities to be maintained and so forth, and we are involved with them, as I said, on the subsea side as well as on the field. And so we are a relevant provider in most of the markets, deepwater markets, offshore markets. And I think the clients want to have us there. How the comps will look like at the end, it's very hard to predict. At our side, we are taking all the precautions to make sure that when we adjust our capacity to demand we foresee, at the same time, also maintain our track to deliver our strategy of reducing CO2 to the clients because there's no question that when it is all done and we'll get back to production and so forth in the CO2 agenda and global warming are still going to be there, so we need -- you're going to need more energy. So we are continuing on that path. In terms of -- so I think we're going to be here and we're going to be -- continue to be a relevant player in the industry. That's what I can say about the market in the future. Of course, in terms of M&A and so forth, we never comment on that, so I'll jump on that one. In terms of margins, I'll let Ole Martin go into more details, but certainly had some one-offs in certain projects we are closing down. And we also have some COVID-19 impact, but underlying margins are basically in line with what we have seen in previous quarters. Ole Martin, can you put some color on it?

O
Ole Martin Grimsrud
Chief Financial Officer

Amy, our EBITDA within Services, excluding special items, was NOK 78 million. As we said, we have some one-off adjustments of NOK 60 million related to the coronavirus and some contract-related adjustments in Brazil related to the assumed lower activity level going forward. So if you add the one-off adjustments, not in special items, then you are at EBITDA at NOK 138 million, and then we have a similar margin like the previous quarter.

L
Luis Antonio Gomes Araujo
Chief Executive Officer

It's also important to add that we have changed the mix a little bit with some brownfield that usually -- as we forecasted. So we see some resilience on the SLS, as you call it, on the subsea services, which made good going forward.

Operator

[Operator Instructions] We'll now take our next question from Haakon Amundsen from ABG.

H
Haakon Amundsen
Lead Analyst

Two questions for me, please. Obviously, I understand that visibility now is very low. But you are talking about cost reductions also kind of from a structural change in the market. So my question is, if you look beyond 2020, you have a backlog of below NOK 8 billion for execution in 2021. In your cost reduction plans, are you planning for lower activity in '21 than in '20? That's kind of my first question. And the second question is that, at least on some forecast, there could be a risk of you coming in violation of the loan covenant on leverage. And I'm just wondering if that is also the case on your projections. And how -- if that is the case, how your -- what is your strategy to address that, please?

L
Luis Antonio Gomes Araujo
Chief Executive Officer

Thank you, Haakon. Good question. So the first one, you're absolutely right. At the current moment, it's almost impossible to predict, as our clients are reviewing what they're going to do in terms of CapEx, very unprecedented circumstance in terms of price, cash flow and so on. So we know that some of the greenfield project has been moved to the right. There's no question about that. But we also see that some -- I would say, some low-cost oil and some tiebacks will remain. So -- but I think going forward, at least the next couple of years, especially in subsea, which is where we have to watch because we have plants and that's why we took capacity out of Norway, as I mentioned in the presentation, 63 is less. And again, we are probably the last one to take one of the plants out of the secret comparing to the competitors, so we foresee less activity for sure in 2021 and so forth. But early days to say, and I think it might be measures taken in some place. I think I mentioned that in some countries, it might be important for countries and governments to maintain activities. So we expect that things will change. And also, I think when it comes to carbon capture and some of the green projects that we've been involved on, we believe they will progress because it's important, and the agenda for CO2 won't go away. So basically, in terms of how much capacity we adjusted, we are adjusting as what -- as we see. Of course, we have backlog to deliver in 2020 and some in 2021. And like everybody else, we need more projects. But we adjust capacity. If we need to, we will take more capacity out. And again, we have 2 plants after closing down, making [ trees, ] right, after closing down the production line in Norway, but those plants are also going to be reduced in terms of people and to complete demand in those locations. So we have to, I guess, navigate as you go. And in terms of covenants, I would hand that to Ole Martin.

O
Ole Martin Grimsrud
Chief Financial Officer

Sure. Maybe for me also to add on the first part of the question. I would say that we experienced that several potential clients are now waiting for stimuli package from governments in order to sanction prospects we already are involved in. Hence, our decision from -- for instance, the Norwegian government regarding tax incentives for the oil and gas companies would support our order intake in the second half of the year and also revenues into 2021. And the second part of the question, Haakon, markets are still uncertain. It's too early to say how deep and how long. We have already implemented drastic measures to reduce cost, reduce investments, improve our working capital in addition to other measures to protect the balance sheet. As I said, too early to say if we -- these measures will fully mitigate the impacts of the coronavirus and the low oil price given the very quick decline in the market. So our main focus is to continue to focus on measures to improve cash flow and protect the balance sheet.

L
Luis Antonio Gomes Araujo
Chief Executive Officer

Yes. So I guess in short, Haakon, we are working on things we can work on and, of course, watching the market closely.

Operator

[Operator Instructions]

T
Tove Røskaft
Head of Communications & Investor Relations

Okay. While we wait for more callers to call in, we have a couple of questions that is written in. This is from [indiscernible]. Ask if we would give any numbers related to the revenue backlog for CCUS and offshore floating wind?

L
Luis Antonio Gomes Araujo
Chief Executive Officer

Okay. We usually don't report backlogs separately for these units, but it's fair to say that we have some projects ongoing in CCUS like Twence in Holland. But we're expecting, of course, some decision on larger projects in Norway this year. So we don't provide this kind of information separate. And when it comes to offshore floating wind, is -- I guess, is a little early. Projects are -- we had several projects we mentioned before. California, Korea, and there are other prospects coming into the market. We have some tenders for other pilot projects ongoing, but very early days. Most of the projects are still on the study development phase, so we don't see revenues on those projects until 2021, at the earliest.

T
Tove Røskaft
Head of Communications & Investor Relations

Thank you, Luis. There's also a question from Frederik Lunde at Carnegie. It's a bit more specific to what Amy asked. Do you consider more structural capacity adjustment this year, such as evaluating leaving geographies with weak market positions or profitability?

L
Luis Antonio Gomes Araujo
Chief Executive Officer

That's a good question. It's exactly what we are doing. I think when I mentioned in my presentation that we are reviewing -- reducing overheads, we are basically looking to every location. And of course, if they are not -- if they'll have a future and not profitable, we're going to exit. And we have mentioned a couple already in my presentation today. And that's what we're going to be doing. We know which was important for clients for future. So that's our goal.

O
Ole Martin Grimsrud
Chief Financial Officer

Maybe I add to Luis on the cost reduction program, we presented earlier. On the fixed cost reduction program of NOK 1 million (sic) [ NOK 1 billion ] a substantial part of that is related to closure of plants and offices. And we mentioned certain locations earlier. But in addition, we have a significant part of the cost reduction is also related to overhead staff functions as well as other fixed cost in the group. But certainly, footprint would be a component of the cost reductions in the group over the next quarters.

T
Tove Røskaft
Head of Communications & Investor Relations

Okay. Thank you. The last question typed in is from Jonas Shum at Swedbank. CapEx guidance for 2020 has been reduced by 40% to around NOK 500 million. Does this mean that already made commitments have been pushed into 2021? Or do you have the flexibility to reduce CapEx further in 2021?

L
Luis Antonio Gomes Araujo
Chief Executive Officer

I can start, and then Ole Martin can put some more color. But certainly, we have flexibility in 2021, and will be certainly lower, as you see today, than we see it today in 2020. Since in 2020, a large part of the CapEx was committed. I think Ole Martin mentioned, for example, the Mero tooling in Brazil that are required for leasing into Petrobras. So that's being concluded now in the first quarter. And there are other commitments as well that we need to finish to deliver on projects that -- and they will bring revenues on projects that we have on the backlog. And then there are some investments that we are maintaining for the future on 20/25/30, but -- so we have value flexibility in 2020.

O
Ole Martin Grimsrud
Chief Financial Officer

Jonas, CapEx, NOK 500 million for this year. Key investments at the moment is, as we say, related to commitments, I would say, back in 2018. And we currently invest in investments like rental equipment, technology related to subsea projects. And most of these investments were finalized in the first quarter. If you look into the numbers, NOK 275 million of the NOK 500 million came in first quarter. Hence, the capital expenditures for remaining of 2020 will be very limited. And into 2021, we also expect low and limited investments. And we are not guiding on 2021 investments yet, but it will be considerably lower than our previous CapEx guidance.

T
Tove Røskaft
Head of Communications & Investor Relations

Thank you. Moderator, if there are more callers on the line, you can let some new questions come through.

Operator

There are currently no questions queued. [Operator Instructions]

T
Tove Røskaft
Head of Communications & Investor Relations

Okay. I have a few more here. Yes. Okay. Then we'll take a few more written questions. We'll start with Kristoffer Pedersen at Nordea. Do you see a risk that projects that are in the current backlog are canceled given the current oil prices? If so, do you have cancellation compensation in all the contracts?

L
Luis Antonio Gomes Araujo
Chief Executive Officer

Yes. Good question. I think we mentioned that on the presentation that we have had no cancellations so far, which is very positive because we have seen in the market a few projects being canceled. So at the moment, we have no cancellations. So that's the current status. And I think most contracts have cancellation clauses, that's for sure. And also some of -- most of the projects we have there are quite well advanced. So it becomes -- just like our CapEx, becomes quite hard for clients to cancel. So that's the stage for us on cancellations.

T
Tove Røskaft
Head of Communications & Investor Relations

Okay. Thank you. Then we have a question from Sahar Islam. What is the outlook for integrated projects and the partnership with Saipem? And the second question, do you expect more M&A this downturn in the industry?

L
Luis Antonio Gomes Araujo
Chief Executive Officer

Okay. When it comes to integrated offers, we're still working with Saipem, and that's the goal. We definitely believe in the relationship. We also believe that we are close to awards before the downturn. But as I said, those partnerships are for greenfield projects, and a good majority of them have been pushed in time, at least a decision, due to the current oil price. But the long term, I think Saipem and Aker Solutions are a good combination, especially on technical ground and very strong in some locations. So yes, we still -- when the clients want an integrated offer, that's our route to the market, and we are committed to that. And the second part, I think it was about M&A. And I would say that we never comment on M&A. I mean, that's pretty standard, I would say. But of course, we always look to see what's best for our company, and that's not going to be different now in the downturn.

T
Tove Røskaft
Head of Communications & Investor Relations

Thank you. That is the last question we have. So then I will thank you all for calling in and listening to us today, and we'll talk to you the next time. Have a good day.

L
Luis Antonio Gomes Araujo
Chief Executive Officer

Thank you. Stay safe.